For the first time ever each landless worker employed under the National Rural Employment Guarantee Act (NREGA) will find positive movements in the share market indices something to croon over. Finance minister Pranab Mukherjee has introduced an expenditure category in Budget 2010-11 that makes the link transparent.
This is a major departure introduced by the finance minister and he has reasons for it. To put it simply the Budget papers show if the stock markets pick the shares of public sector companies with enthusiasm in 2010-11, there will be directly more money for spending on the NREGA.
The change is the culmination of a decade-long effort the government has been putting in to make disinvestment work for financing the social sector. There will be now an almost one-to-one correlation between the way the share markets move and the financing of the key social sector programmes, including the largest ever rural employment programme, the NREGA, as well as rural housing.
To do this the finance ministry has introduced a new expenditure class in the demand for grants of the ministry of rural development in this Budget (page 194). This was not there in any previous budget.
As a result of the Rs 40,100 crore earmarked by the finance minister to fund the NREGA, Mukherjee has explicitly put Rs 18,768 crore or almost 47% to be financed from the National Investment Fund. The fund is where the disinvestment money is parked.
Another Rs 8,448 crore will be released by the Fund to finance one more ambitious social sector programme, the rural housing scheme.
Till Budget 2009-10, the government has allocated money from the general treasury, the Consolidated Fund of India to run the NREGA.
As the budget papers show, a sum of Rs 39,100 crore was earmarked for this purpose. Disinvestment proceeds were not marked for use in any specific programmes, as has been done now.
But the new type of financing could raise an issue of whether disinvestment proceeds should be used to finance a purely wage employment programme. The finance ministry is aware of the criticism but it has tried to get around it in its explanatory notes to the expenditure budget. It says they disinvestment proceeds are ?being utilised for part funding of the (two programmes) as grants in aid for creation of capital assets?.